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Dollar slips after Treasury expands long-dated debt buybacks
The 30-year Treasury yield fell back below 5.20% after the Treasury said it will lift buybacks to at least $4 billion from Sept. 9, cutting recent yield support for the greenback.
The U.S. dollar weakened broadly on Wednesday after the Treasury announced it will at least double the maximum size of its long-dated debt buyback operations, from $2 billion to at least $4 billion, beginning Sept. 9 through Nov. 4, according to Action Forex.
The move targeted the 10 to 20 year and 20 to 30 year parts of the curve, where selling pressure had been most intense since late June. In the immediate reaction, the 30-year Treasury yield dropped back below 5.20% after trading above 5.33% earlier in the week, removing recent yield support for the dollar.
Action Forex noted that the buybacks are intended to improve liquidity rather than address the underlying fiscal deficit that pushed yields toward two-decade highs. The larger operations do not start for about three weeks, but markets nevertheless repriced long-end yields quickly once the announcement was released.
Attention now shifts to the July FOMC minutes, though Action Forex said the key issue is whether any hawkish signal extends beyond the three official dissenters and whether that message is still relevant given new data since the July 30 meeting. The outlet also flagged that liquidity relief may contain yields near term, but it does not eliminate government financing needs.